Where is the juice grape market headed?

Greg MacGill

On the surface, Washington State’s juice grape industry looks the picture of good economic times—crop inventories are in balance with demand and cash prices are strong, setting a record in 2012. But growers aren’t being encouraged to plant more juice grapes, perhaps a subtle sign of an ­uncertain future.

Grape concentrate inventories are tight right now, says Jim Gauley, president of FruitSmart, a specialty fruit ingredient supplier in Grandview. “A few more acres of Concords would be okay, but let’s not get carried away,” he said, adding that nobody makes any money when a gallon of concentrate is selling for $10.50, the price it sold for in 2007.

Concord grape acreage in Washington is estimated at less than 21,000 acres, with another 1,500 acres of ­Niagara—the lowest numbers in years. Since 2007, when acreage topped 24,500 acres, more than 3,000 acres have been removed.

And though grower prices for Concord and Niagara grapes in Washington have been at record levels the last two years—$250 per ton in 2011 and $280 last year—few growers have opted to participate in National Grape’s expansion program that began several years ago, says Craig ­Bardwell of National Grape.

The expansion is an ongoing program, Bardwell said, and has a goal of adding 1,000 acres to the cooperative’s acreage. “We’ve added a few acres over the last couple of years, but with the acreage that’s been coming out, we’re not gaining much on our goal.”

With so many other crops in Washington State doing well, growers aren’t replanting juice grapes with juice grapes, but are switching to other crops, like corn or alfalfa hay or selling to local dairies needing more ground.

Dark clouds

During a session examining the future of the juice grape industry, a panel of grower, processor, and retail market representatives discussed trends that point to a cloudy future for the juice grape industry. The discussion took place during the Washington State Grape Society’s annual meeting in Grandview.

FruitSmart’s Gauley said that prices for nearly all juice concentrates have been very strong the last few years due to record fresh-market prices for fruits like apples.

For juice grapes, he says the market is high for several reasons:

•    Processors entered the 2011 crop with low inventories and pricing at an all-time high.
•    Weather problems in 2011 and 2012 created continued tight supplies.
•    Acreage of red and white grape varieties in California used for concentrate blending is decreasing and ­supplies are tight.
•    Inventories of other juice concentrates are tight and at the upper end of their historical pricing.

“At some point, these prices have to come down from their current peak, and we’ll have a more normal processed market,” Gauley said. “It probably won’t be this year for juice grapes because there’s such a short crop, but history said we are heading into a declining market.”

Historically, juice grapes are a very cyclical industry, he says, noting that the industry has been in one of the longest cycles ever.

Where the floor will go for the grape concentrate price is anybody’s guess. “Will we see $7 per gallon for 68 Brix concentrate?” asks Gauley. “I’ve never seen concentrate prices higher than $14 per gallon, and we’re now at $19.50.”

California influence

California produces very few Concord grapes, but growers there can have a big impact on grape concentrate prices.

Thompson Seedless, a white grape variety with many uses—raisin, table, and wine—is often blended with Concord concentrate for the export market. “Niagara, another white juice grape, is important in blending, but a lot of processors like to use Thompson because of its neutral flavor,” said Greg MacGill of Ciatti Company, a global wine and grape brokerage based in California.

Rubired, a hybrid grape developed at the University of California, Davis, is another popular choice for blending with grape concentrate because of its stable color, MacGill said. Rubired has been widely planted in the last decade and is now one of the top varieties planted in California. He added that 80 percent of the plantings have been by the E & J Gallo Winery to make sweet, red wine blends popular with young wine drinkers.

A shortage of white juice concentrate and demand for Rubired have pushed Thompson and Rubired grower prices to $325 per ton, more than double the $155 per ton prices in 2007, MacGill said. White grape concentrate prices, normally in the $14 to $15 per gallon range, are $19 to $20 per gallon.

California growers have removed about a third of the Thompson Seedless acreage, taking out 68,000 acres in the last decade as they switched to more profitable crops, according to MacGill. “Acreage removal continues at a rate of about two to four percent annually. There’s a short supply of grapes in California and great competition for the remaining grapes.”

MacGill said growers must hit yields of 15 to 20 tons per acre for Thompsons to be profitable. Many are replacing older Thompson vineyards with almonds, a crop that costs half as much to plant ($3,500 an acre compared to $7,000), requires less water, and can return twice the profit.

“For all grapes, we’re thin on inventory, and though we had a good harvest, we need to put juice back in the tanks,” MacGill said. “And with a lot of growers not replanting grapes with grapes, we’ll be short on inventories for a while.”

Retail

Grandview juice grape grower Tim Grow, who’s also on the board of directors of the National Grape Cooperative Association that produces Welch’s juice and food products, said the retail juice market is under pressure from a variety of factors. The juice category is down in volume by 9 percent and in total dollars by 4 percent from the ­previous year.

“The sales trends of 100 percent juices are the worst, with volume down by 11 percent, but all juices are suffering from the weak economy and more consumers drinking bottled water,” said Grow, pointing to retail juice market data collected by SymphonyIRI.

He added that Welch’s grape juice has grown slightly in volume, but at the expense of stealing consumers from minor brands and private labels. In the 100 percent juice segment, Welch’s has a majority of the brand market, and increased dollar sales and volume from the previous year by 3 and 4 percent, respectively.

“But we’re not adding consumers to the category, and the 100 percent juice consumption is declining,” said Grow. “Grape juice is also declining because it’s the ­highest priced of all juices.”

He notes that Welch’s continues to market and innovate aggressively to maintain market share for Concord grapes, but the juice market is contracting. “New consumption will need to come from new markets, such as new foreign markets,” he concluded.